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Petrobras (NYSE:PBR) officials expect to fall short of the Brazil government’s goals to cut natural gas prices by 40% because of the high cost of extraction in ultra-deep waters, Bloomberg reported late Friday.
Petrobras (PBR) executives believe such a price cut would be unrealistic given the company extracts gas 300 km off the coast and faces much higher production costs compared to onshore shale gas drillers abroad, according to the report.
As President Luiz Inacio Lula da Silva tries to steer Brazil’s economy in a more populist direction, the government has said Petrobras (PBR) devotes too much gas to aiding crude production and could lower the price to $7-$8/MMBtu from ~$12 currently if it managed the resource differently.
Petrobras (PBR) argues that using gas to increase well pressure brings more oil to the surface and raises the recoverable volume from pre-salt fields by as much as 30%.
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